Ethics Article Review Paper

Ethics Article Review Paper (Revised)

Shirley Smith

University of Phoenix

FIN 324

Walter P. Lambert

December 1, 2006

A study done between Motorola and Ericsson on the implementation of Corporate Ethics and the transformation within the corporations following the implementation of the Sarbanes-Oxley Act of 2002, looking at various ethic theories, such as stockholder theory, stakeholder theory, and legitimacy theory.

Since the Sarbanes-Oxley Act, which was enacted in response to the Enron and WorldCom collapses and designed to restore confidence and maintain integrity in businesses. Companies are to disclose if they have a code of ethics. Under the rules, a company must disclose whether it has adopted a code of ethics that applies to the company’s principle executive officer, principle financial officer, principal accounting officer or controller, or person performing similar functions.

The stockholder theory suggests that organizations are responsible only to shareholders, and all of the employees’ actions are directed towards maximizing shareholder wealth without breaking the law. Manager’s act as agents to the stockholders, the business can have no social responsibility (Hasnas 1998).

The legitimacy theory is a generalized perception that the actions of the organization are proper or appropriate within a given social system (Lehtonen, 2003). Legitimacy theory holds that companies are continually attempting to ensure that their operations fall within the norms of their societies.

It also relies upon the notion of a social contract and on the maintained assumption that managers will adopt strategies that show society that the organization is attempting to comply with society’s expectations. Action and presentation are the two dimensions in an organization’s effort to gain legitimacy.

The Stakeholder theory suggests that organizations are not only responsible to shareholders, but also that they are responsible to all individuals, group, etc. that have a stake in a particular organization (Jennings, 2003), and is also consider to be an open theory ever changing to meet the changing role of ethics so it may never mature.

In order to achieve responsible ethical behavior, an organization must use the application of stakeholder theory in conjunction with structuration theory, which is the framework for exploring the forces that influence, and the changes that must precede the development and implementation of ethical decision processes (Dillard and Yuthas, 2002).

Motorola finds corporate ethics to be critically important and had published its code of conduct in 1976, with improvements made in 1993 and the final version done in 1999 to reflect the changed nature of their business needing to ensure a user-friendly Code that would apply around the world. (Janis Solarz).

In 2002, Motorola was ranked sixth out of one hundred of the Best Corporate Citizens, from standing strong in its commitment to ethics. (Palmer, 2003). The company functions on two basic principles, uncompromising integrity and constant respect for people.

Ericsson’s